Blockchain activity tied to MakerDAO's maker (MKR) token is signaling caution to bulls following MKR's 45% price surge in four weeks.
The number of MKR held in wallets controlled by centralized exchanges has increased by 5% to 71,190 MRK ($106 million) in the past 24 hours, taking the total exchange balance to the highest since Sept. 3, according to Coinglass. MakerDAO is one of the largest crypto lending protocols and issuer of the $5 billion stablecoin DAI. MakerDAO's sDAI represents DAI deposited in the protocol's DAI Savings Rate (DSR) module.
The notable spike in the exchange balance may breed price volatility, mainly to the downside. An increase in the so-called exchange balance is widely taken to represent investors' intention to sell or liquidate their holdings or deploy coins as a margin in derivatives markets.
"An inflow of MKR moving to exchanges is something to be cautious of for at least a temporary local top," analytics firm Santiment tweeted, noting the recent rise in MKR's price and active addresses.
The previous spikes in the exchange balance, seen in late last month and mid-March, marked interim price tops, as seen in the chart below.
MKR has been on a tear since defending the psychological support level of $1,000 late last month, thanks to its investments in the short-term U.S. Treasury notes, which are now yielding over 5%.
According to data tracked by Parsec, MakerDAO has invested more than $2 billion of its vast stablecoin reserves in U.S. Treasury notes.
"MKR continues to enjoy a strong first-mover advantage having invested over $2 billion in short-term bonds through off chain structures since February 2022," Parsec Research's weekly note dated Sept. 22 said.
"With such a large RWA [real world assets] portfolio, MKR is able to offer a 5% Savings Rate on DAI and buy back MKR with surplus profits. The success of sDAI and a constant flow of MKR buybacks (thanks to the Smart Burn Engine) has led to continued MKR outperformance relative to its DeFi 1.0 peers," Parsec added.
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